WARRANT EXERCISE OR
EXCHANGE AGREEMENT
THIS WARRANT EXERCISE OR EXCHANGE
AGREEMENT (the “Agreement”) is dated as of October 21,
2009, among HepaLife Technologies, Inc.,
a Florida corporation (the “Company”) and the
holders identified on Schedule A hereto (each a
“Holder” collectively the
“Holders”).
WHEREAS, pursuant to the
terms of the Subscription Agreements dated as of May 23, 2008
between the Company and each of the Holders (the
“Subscription Agreements”), the Warrant Holders
purchased an aggregate of 12,989,830 Series C Warrant (the
“Series C Warrants”) to purchase an additional share of
our common stock (the “Warrant Shares”), at an exercise
price of $0.34 per share (the “Exercise
Price”).
WHEREAS, the Company and Holders
desire to Exercise or exchange the Series C Warrant on the terms
set forth in this Agreement. Capitalized terms used herein
and not otherwise defined shall have the meaning ascribed thereto
in the Subscription Agreement.
NOW, THEREFORE, IN CONSIDERATION of
the mutual covenants contained in this Agreement, and for other
good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Seller and the Purchaser agree as
follows:
ARTICLE I
EXERCISE OR
EXCHANGE
1.1
Holder’s Option .
(a) Each
Holder agrees to either: (i) exchange all Series C Warrants for
shares of the Company’s common stock, on the basis of one (1)
share of common stock (“Exchange Shares”) for every two
(2) shares of the Company’s common stock purchasable by such
Holder pursuant to the Series C Warrants (the “Securities
Exchange Option”). No fractional shares shall be issued
in exchange for the Series C Warrants; or (ii) exercise all of its
respective Series C Warrants to purchase the Company’s common
stock (the “Exercise Shares”) at a reduced exercise
price of $0.10 per Warrant Share (the “Warrant Exercise
Option”). The Exchange Shares and the Warrant Shares are
sometimes herein referred to as the
“Securities.”
(b)
Each Holder shall make its election as to which option
it wishes to exercise on the signature page hereto.
1.2
The Closing
Upon satisfaction of the
conditions set forth in Sections 1.3, the Closing shall occur at
the offices of Sierchio & Company, LLP, 430 Park Avenue, New
York, NY or such other location as the parties shall mutually
agree. The date of the
Closing is hereinafter referred to as the “Closing
Date.” The Closing shall occur no later than October
31, 2009. The Closing date shall be established by the
Company and notice thereof given to the Holder.
1.3
Deliveries
(a)
Warrant Exercise Option.
(i)
On the Closing Date, the Company shall deliver or cause to be
delivered to each Holder having elected to effect the Warrant
Exercise Option certificate(s) evidencing the Exercise Shares
registered in the name of such
Holder.
(ii)
On or prior to the Closing Date, each Holder having elected
to effect the Warrant Exercise Option shall deliver or cause to be
delivered to the Company the following:
(1)
the total purchase price for the exercise of the Class C Warrants
at the reduced Exercise Price; and
(2)
such Holder’s Series C Warrant.
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(b)
Securities Exchange Option
(i) On the Closing Date, the Company shall deliver or cause to be
delivered to each Holder having elected to effect the Securities
Exchange Option certificate(s) evidencing the Exchange Shares
registered in the name of such Holder.
(ii) On or prior to the Closing Date, each Holder having
elected to effect the Securities Exchange Option shall deliver or
cause to be delivered to the Company such Holder’s Series C
Warrant.
1.4
Termination
This Agreement shall be
null and void if it is not executed, delivered and countersigned by
the Company and each Holder no later than 5:00 pm (EDST) on
October 31, 2009 (the “Expiration Date”). The
Exchange Shares and Warrant Shares will not be delivered upon the
execution of this Agreement. The Company’s obligations
hereunder are further subject to the satisfaction by all of the
Holders of the delivery requirements set forth in Section 1.3
hereof.
ARTICLE II
REPRESENTATIONS AND
WARRANTIES
2.1
Representations and Warranties of the Company . The
Company hereby makes the following representations and warranties
to the Purchaser:
(a)
The Company has full power and
authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws from time to time in
effect that affect creditors’ rights generally, and by legal
and equitable limitations on the availability of specific
remedies.
(b)
The execution, delivery and
performance by the Company of this Agreement and consummation by
the Company of the transactions contemplated hereby do not and will
not: (i) violate the organizational documents of the Company, (ii)
violate any decree or judgment of any court or other governmental
authority applicable to or binding on the Company; (iii) violate
any provision of any federal or state statute, rule or regulation
which is, to the Company’s knowledge, applicable to the
Company; or (iv) violate any contract to which the Company or any
of its assets or properties are bound, or conflict with, or
constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of ,
any agreement, indenture or instrument to which Company is a
party. No consent or approval of, or filing with, any
governmental authority or other person not a party hereto is
required for the execution, delivery and performance by the Company
of this Agreement or the consummation of the transactions
contemplated hereby.
(c)
The Exchange Shares and
Warrant Shares are duly authorized and, when issued and paid for in
accordance with this Agreement, will be duly and validly issued,
fully paid and non-assessable, free and clear of all
Liens.
(d)
The Warrant Shares are
subject to the Company’s registration statement (SEC File
No. 333-160472) as filed with
the Securities and Exchange Commission (the
“Commission”), which the Company agrees to maintain
current for a period of six months following the Closing Date
, and with respect to which agrees to
file, if required, a post effective amendment reflecting the
re-pricing of Exercise Price in accordance with this
Agreement.
(e)
The Company has not
issued any capital stock since its most recently filed periodic
report under the Exchange Act, other than pursuant to the exercise
of employee stock options under the Company’s stock option
plans, the issuance of shares of Common Stock to employees pursuant
to the Company’s employee stock purchase plans and pursuant
to the conversion and/or exercise of Common Stock Equivalents
outstanding as of the date of the most recently filed periodic
report under the Exchange Act
(f)
The Company has filed
all reports, schedules, forms, statements and other documents
required to be filed by the Company under the Securities Act and
the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such
shorter period as the Company was required by law or regulation to
file such material) (the foregoing materials, including the
exhibits thereto and documents incorporated by reference therein,
being collectively referred to herein as the “SEC
Reports”) on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to
the expiration of any such extension. As of their
respective dates or as subsequently amended, the SEC Reports
complied in all material respects with the requirements of the
Securities Act and the Exchange Act, as applicable, and none of the
SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. The
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financial statements of the Company
included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of
the Commission with respect thereto as in effect at the time of
filing or subsequent amendment. Such financial
statements have been prepared in accordance with GAAP, except as
may be otherwise specified in such financial statements or the
notes thereto and except that unaudited financial statements may
not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(g)
The Company has taken no action that would give rise to any claim
by any person for brokerage commissions, finder’s fees or
similar payments relating to this Agreement or the transactions
contemplated hereby.
(h)
Neither the Company nor any other Person
acting on its behalf, will provide any Holder or its agents or
counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Holder
shall have executed a written agreement regarding the
confidentiality and use of such information. The Company
understands and confirms that each Holder shall be relying on the
foregoing covenant in effecting transactions in securities of the
Company.
(i)
Assuming the accuracy of each of the representations and warranties
set forth in Section 2.2 of this Agreement, the securities to be
issued pursuant to this Agreement are exempt from the registration
requirements of the Securities Act.
2.2
Representations and Warranties of the Holders . Each
Holder for itself only hereby represents, warrants and agrees as of
the date hereof:
(a) The
Holder has full power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the
Holder and constitutes the legal, valid and binding obligation of
such Holder, enforceable in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect
that affect the enforcement of creditors’ rights generally
and by equitable limitations on the availability of specific
remedies.
(b) The
execution, delivery and performance by such Holder of this
Agreement and consummation by the Holder of the transactions
contemplated hereby do not and will not: (i) violate any decree or
judgment of any court or other governmental authority applicable to
or binding on the Holder; (ii) violate any provision of any federal
or state statute, rule or regulation which is, to the
Holder’s knowledge, applicable to the Holder; or (iii)
violate any contract to which the Holder is a party or by which
such Holder or any of its respective assets or properties are
bound. No consent or approval of, or filing with, any
governmental authority or other person not a party hereto is
required for the execution, delivery and performance by the Holder
of this Agreement.
(c) The Holder is an
“accredited investor.”
(d) The
Holder is aware of the Company’s business affairs and
financial condition, and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to
acquire securities pursuant to this Agreement, and acknowledges
that following the Closing, the Company may complete such transactions, including, but not
limited to mergers, acquisitions and financings all on terms
and conditions which the Company in its sole discretion deem
acceptable or advisable, the effect of some or all of which will be
a dilution of such Holder’s equity ownership in the
Company.
(e) The
Holder is acquiring the Exchange Shares
or Warrant Shares for its own account and not with a view
towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that except
as provided below in paragraph (h) of this section, by making the
representations herein, such Holder does not agree to hold the
Exchange Shares or Warrant Shares
for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the
Securities Act.
(f)
The Holder has taken no action that would give rise to any claim by
any person for brokerage commissions, finder’s fees or
similar payments relating to this Agreement or the transactions
contemplated hereby.
(g)
Other than consummating the transactions
contemplated hereunder, Holder has not directly or indirectly, nor
has any Person acting on behalf of or pursuant to any understanding
with such Holder, executed any purchases or sales, including short
sales, of the securities of the Company during the period
commencing from the time that such Holder first received a term
sheet (written or oral) from the Company or any other Person
representing the Company setting forth the material terms of the
transactions contemplated hereun
